Inflation, economic uncertainty, and fluctuating mortgage rates don’t seem to be slowing down the housing market. Spring is always the strongest season for buying and selling houses, and the housing market for March 2022 is no exception. Unfortunately, all-cash offers are still more common than many homebuyers would like them to be. A bidding war may be likely.
But like a lot of things in life, being prepared has its benefits. If your dream home turns into a bidding war, these top strategies can help you compete.
Top 5 Strategies to Win a Bidding War in Today’s Housing Market
As we head into Spring 2022, housing season is hotter than ever. More than ever, people are relocating to be near family or start a new career. As people move in and out of state, housing inventory increases. But the competition can beat out even the most qualified buyers.
These five strategies will help you win your dream home, even in a bidding war.
1. Get pre-approved for your new mortgage.
This might seem obvious. But getting pre-approved for mortgage financing before you find your perfect home is one of the smartest moves you can make. When you’re pre-approved and make an offer, the seller knows without a doubt that your financing won’t fall through. Your offer just became that much more attractive against other bids.
Getting pre-approved for your mortgage means your lender has verified your loan. Your credit report, financial profile, income verification and employment—every requirement has been met and your home loan is all but funded.
TIP: In a competitive market, the seller will know that your loan is fully approved when you are pre-approved and not simply pre-qualified.
Ultimately, when you get pre-approved for a mortgage, the seller knows your financing will follow through as promised.
This means less stress and worry for the seller and a faster close.
2. Increase your good faith deposit (earnest money down).
Your good faith deposit, or earnest money down, is the amount you put down to reserve your right to buy the home. A good faith deposit shows the seller that you’re serious about your offer. If you decide to walk away after you’ve made an offer with earnest money down, the seller can keep your full deposit.
It’s a strong move to show the seller how much you’re willing to risk losing (if you walk away) and that you’ll do everything you can to win the bid against an all-cash offer.
TIP: If you want to stand out in the competition, consider increasing your earnest money down. If the seller rejects your bid, you won’t lose your good faith deposit.
(A good faith deposit is only forfeited if a buyer walks away after the seller has already accepted the offer.)
Ultimately, a large good faith deposit shows the seller how much you’re willing to risk with real dollars.
3. Make an offer above the asking price.
Did you know that many all-cash offers are below the asking price? Homebuyers who bring all-cash offers are betting that the seller will accept a lower price in exchange for a fast and easy sale.
This is an opportunity to raise your offer. Going above asking is a strong move to stand out and beat other offers, even an all-cash bid.
TIP: Consider talking with your realtor about including an escalation clause. This allows you to raise your offer automatically (up to a limit) if another buyer bids higher.
4. Choose to waive contingencies.
In a competitive housing market, you want to make the transaction easier on the seller. You can do this by waiving a few common contingencies.
For example, consider waiving the financing contingency—this means you won’t be able to back out of the offer if the mortgage doesn’t fund.
TIP: When you get pre-approved for your mortgage, you can be confident that your loan will be funded.
Talk with your realtor to consider waiving other contingencies as well: the appraisal contingency, sale contingency, and inspections contingency.
Discuss each contingency with your real estate agent and decide what kind of risk you’re willing to take. Waiving contingencies is a great strategy to win over a seller and beat an all-cash offer.
TIP: If you are buying a home that’s less than ten years old, the home is often still covered under warranty by the builder. Talk to your realtor about the details.
5. Write a personal letter.
Believe it or not, writing a personal letter to the sellers can really make a difference when you’re making an offer in a competitive housing market. Buying and selling a home is an emotional decision for most buyers and sellers. Writing a letter is a reminder that we’re all human here.
After the offers and financials are considered, a personal letter can go a long way to help you stand out when multiple offers are on the table.
TIP: Many homeowners often choose buyers who they can imagine living in their home once they’ve packed up and moved on. Keep the sellers in mind when you write your letter.
You can include specific things you love about the home, why it’s a great fit for your family, or how you see your family growing and building a life here. Don’t be afraid to set yourself apart and bring your emotion to compete against other offers.
If you’re shopping for your next home in Spring 2022, getting pre-approved for a mortgage is the best action you can take. You’ll be able to shop with confidence, especially if you’re looking to buy a home in a competitive area. You can still win the bidding war.
We can guide you through the process and help you get approved for your best mortgage. You’ll know exactly how much you can afford before you make an offer. Connect with a local mortgage advisor to get started. We’d love to help.